The Mini Mushroom goes "against the flow" of Mario Power Ups and acts more as a "Power Down" - it does not grant the player an extra hit pint like the Super Mushroom and makes the game somewhat harder to play normally. Mini Mario's jumps wil not affect enemies, forcing him to perform a ground pound should he want to attack. The benfits of the Mini Mushroom include decreased weight allowing Mario to run on the surface of water, and the ability to fit inside tiny pipes and passages normal Mario could not. In New Super Mario Bros. U, it also allows scaling of certain walls when running at top speed.
A similar item exists in the Mario Party 4 - predating the New Super Mario Bros series - with a very similar effect.